The Next Trend in Organizations? Y Combinator-like Funds

When Y Combinator was started a few years back, I doubt they knew how successful they would be. The company has invested in numerous companies that have obtained future rounds of funding or have been acquired. If you follow the web technology space there’s a good chance that you’ve heard of most of their companies. Over the past year numerous Y Combinator copycats have sprung up around the country.

Techstars in Denver, LaunchBox Digital here in Washington, D.C., Dreamit Ventures in Philadelphia, and many others around the country have attempted to duplicate Y Combinator’s strategy with mixed success. Media companies are paying close attention to this model and considering that each startup doesn’t receive more than $10,000 to $30,000, it’s a cheap investment for most large media organizations.

Given that most media companies are suffering in the current environment, they are willing to try just about anything to spark innovation that can positively impact the company. One executive at a large media company in New York that I met with on Monday suggested that they are considering opening up their library of content to developers and will start writing checks to get “hackers” to build interesting applications.

Whether or not this model works has yet to be proven but for such a small investment it’s well worth the risk for most of these companies. Even some governments have taken to the model including Maryland which has its own small business incubator sponsored by the state government. At Internet Week New York last year, a number of organizations announced NYC Seed which was a $2 million fund for startups in the New York City area.

The trend continues and over the next 12 months my guess is we will see many more of these types of funds spring up around the country both from within organizations, governments, as well as organized by groups of individuals. One person after the other that I speak with is in some way related to the launch of one of these funds somewhere in the country.

Do you know of any other companies launching these types of funds? What do you think of the model?